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Uncertain Trends in Economic Policy Uncertainty

Author

Listed:
  • Nino Buliskeria

    (Institute of Economic Studies of the Faculty of Social Sciences, Charles University, Prague, Czech Republic & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic)

  • Jaromir Baxa

    (Institute of Economic Studies of the Faculty of Social Sciences, Charles University, Prague, Czech Republic & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic)

  • Tomas Sestorad

    (Institute of Economic Studies of the Faculty of Social Sciences, Charles University, Prague, Czech Republic & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic & The Czech National Bank, Prague, Czech Republic)

Abstract

The news-based Economic Policy Uncertainty indices (EPU) of Germany, France, and the United Kingdom display discernible trends that can be found neither in other European countries nor in other uncertainty indicators. Therefore, we replicate the EPU index of European countries and show that these trends are sensitive to the rather arbitrary choice of normalizing the raw counts of news related to economic policy uncertainty by the count of all newspaper articles. We show that an alternative normalization by news on economic policy leads to different long-term dynamics with less pronounced trends and markedly lower uncertainty during recent periods of uncertainty such as Brexit or the COVID-19 pandemic. Consequently, our results suggest that the effects of uncertainty related to these events on economic activity may have been overestimated.

Suggested Citation

  • Nino Buliskeria & Jaromir Baxa & Tomas Sestorad, 2024. "Uncertain Trends in Economic Policy Uncertainty," Working Papers IES 2024/1, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2024.
    • Handle: RePEc:fau:wpaper:wp2024_01
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    2. Boysen-Hogrefe, Jens & Groll, Dominik & Hoffmann, Timo & Jannsen, Nils & Kooths, Stefan & Schröder, Christian & Sonnenberg, Nils, 2024. "Deutsche Wirtschaft im Winter 2024: Kein Aufschwung in Sicht [German Forecast in Winter 2024: No Recovery in Sight]," Kieler Konjunkturberichte 120, Kiel Institute for the World Economy (IfW Kiel).
    3. Baxa, Jaromír & Šestořád, Tomáš, 2025. "Common and country-specific uncertainty shocks in europe: Why their nature matters for policy," Economic Modelling, Elsevier, vol. 150(C).

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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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